The Race Towards Sustainable Private Label - Carrot, stick or collaboration? - RESEARCH REPORT 2020 - IPLC
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RESE A RCH REPORT 2020 The Race Towards Sustainable Private Label Carrot, stick or collaboration? How retailers in Europe address sustainability with private label
Disclaimer The Netherlands
Data was gathered by means of internet search and physical store checks Koen de Jong
by IPLC consultants. In all, more than 50 retailers in eight European kdejong@iplc-europe.com
countries were included in the research. We have made some interesting
observations, although we acknowledge that it is impossible to have André Michel, Partner
captured every individual element into detail or include all initiatives. amichel@iplc-europe.com
However, we believe that from the country reports, a representative
impression can be obtained of what is happening in each market and how France
this relates to others. Remy Medina
rmedina@iplc-europe.com
About IPLC
International Private Label Consult is a boutique consulting firm United Kingdom
specialised in strategic consultancy services and project management Richard Harrow
support to manufacturers and retailers. With a broad an unrivalled rharrow@iplc-europe.com
understanding of the private label industry, we help our clients with a
pragmatic and action-oriented approach. Founded in 2003, IPLC has been Ireland
involved in many international assignments for manufacturers, retailers Malachy O’Connor
and the supply industry. IPLC has offices in the Netherlands, Belgium, moconnor@iplc-europe.com
France, United Kingdom, Ireland, Italy, Spain and Portugal.
Italy
Paolo Palomba
ppalomba@iplc-europe.com
Stefano Ghetti
sghetti@iplc-europe.com
Spain
Luis Sobreroca
lsobreroca@iplc-europe.com
Portugal
Robertus Lombert
rlombert@iplc-europe.com
Copyright
All rights reserved. No part of this
publication may be reproduced
in any form without permission
in writing from the publisher. If
content of this report is used for
presentations the source must be
referred to as International Private
Label Consult BV (or IPLC).
www.iplc-europe.com
Vught, May 2020
2 IPLC | RESEARCH REPORT | 2020 |
COVID-19 Impact
The majority of the research work for this FOOD WASTE
report was completed before Covid-19 hit the With more meals eaten at home consumers
world. Indeed, all of the policies, strategies and will become more conscious about the
initiatives we saw in retailers as part of the waste they generate in their households. The
research for this report were developed long immediate benefits of reducing and re-using
before Covid-19 appeared. It is fundamentally food will be more visible. The use of plastic for
clear that the crisis will potentially bring lasting food protection and to prolong the shelf life
change to the European and world food supply may be reappraised and better understood by
chain, offering an opportunity to break with old consumers.
habits and build a more circular and sustainable
food supply chain. LOCAL SOURCING
Consumers now realise more than ever the
‘Once the COVID-19 crisis is over we must not importance of a strong local agricultural sector
return to a sluggish, linear and carbon-spewing worth protecting. The trend toward fairness in
economy depleting natural resources, producing pricing and trading will be encouraged. Locally
dangerous waste and toxic pollutants, putting sourced food was already on the agenda of
the population and industry at risk, before even many retailers and this topic will become
mentioning climate change’ [Which world do even more important due to the crisis as it
we want after COVID-19? By Bertand Piccard and will support the local and national economy.
Frans Timmermans, 16 April 2020]. In addition, we could see a concerted effort
to shorten supply chains, either through
What will this change look like? agricultural or investment policies. All designed
to support local production, or seeking
At IPLC we see four potential themes. new, possibly higher cost options which are
geographically closer.
ENVIRONMENT
We believe there will be a greater focus HEALTHY LIFESTYLE
on the need to care for the planet and the The Corona virus has made us even more aware
people that inhabit it. There will be demands of the vulnerability of people with an unhealthy
from consumers for greater transparency in lifestyle. More consumers may be looking for
the supply chain and shoppers will insist on healthy products which are free from additives,
information about the origin and processing of pesticides, low in sugar, salt and fat. Also,
their food products. Animal welfare concerns heavy meat consumption may be reconsidered.
will impact consumer behaviour across many As an example: in France organic products have
countries not just in countries such as the UK experienced significant growth.
where it has always been a focus.
As an example: Lidl has recently published
online a full list of their Private Label suppliers,
information that is not normally made public.
| 2020 | RESEARCH REPORT | IPLC 3
4 IPLC | RESEARCH REPORT | 2020 |
Executive summary
Successful businesses have a unique identity, We also observed that the sustainability
they know what they stand for. They also have challenge is highly dynamic. The goalposts
a clear strategy; they know where they are are moving continually in such a way that
now and where they want to go in the future. consumers are confused as to the ‘right’ things
For grocery retailers, the direction of travel is to do, and retailers are reacting in different
clear - more and more of their sales are through ways in different countries. Some topics, such
private label products. In countries such as the as responsible fishing is old news in the UK and
UK, Ireland and Germany, private label now Ireland, whilst coming on the radar only recently
constitutes over half of the packages that in Spain and Portugal. And whilst, single-use
go into the shopping trolleys. This presents plastics and packaging are agreed to be the
both an opportunity and a challenge. The industry ‘bad guys’ we still see retailers driving
opportunity is for retailers to express their sales on badly packaged and non-sustainable
unique identity and their strategic objectives items and consumers that are slow to adopt
through their private label ranges. The new behaviours. Consumers demand choice
challenge is that retail brand managers now and place a value on fresh foods, but these are
need to think about more than just their own the products driving food waste the most.
objectives.
The challenge is huge for big global retailers
In a world where equality, health and climate with significant resources and ‘thought
crisis are daily conversation topics, businesses leadership’ within their global HQs. But it
need to think about what they can do to rise could be overwhelming for local retailers, in
to these generation-defining challenges. To fragmented markets, that lack global thought
harness widespread action, in 2015 the UN centres. Nevertheless, coordinated activity is
created the 17 Sustainable Development Goals required to harness consumers, businesses and
(SDGs). The SDGs represent the most impactful governments to act together. In the world of
ways for businesses, governments and ordinary private label, the key is collaboration. Retailers
people to address the biggest challenges faced demand a continuous supply of safe, healthy,
by humankind, “a blueprint for peace and high-quality, high-integrity consumer goods.
prosperity for people and the planet, now and However, to deliver on these demands and
into the future”. maintain a competitive price position, retailers
and suppliers will need to commit to longer-
With grocers occupying five of the Fortune term contracts that allow manufacturers to
500’s top 50 slots in 2019, it is obvious that invest in new technology and see a return over
our industry has a responsibility to act in a longer period, safe in the knowledge that
support of the UN SDGs, and with private label they will not lose the business after a year.
a growing part of their offer, grocers are in a
unique position to lead the charge. Therefore, We also found that many retailers had already
IPLC surveyed the market to see what the big made sustainability part of their ethos, long
retailers were saying about sustainability both before it was on the consumer’s radar. In highly
online and in-store. We made some interesting competitive markets, sustainability actions help
observations: to reduce costs since they generally involve
using less resources, energy and materials.
Firstly, when scanning the European market, This approach means that the discounters are
and assessing supermarket sustainability sustainability fanatics, that have been living
strategies, we saw two kinds of retailers leading and breathing the principles of corporate
the charge: frugality for many decades already. Finally,
with the retail private label brand managers
•F
irstly, retailers whose actions are consistent starting to make ambitious commitments on
with long-established values of integrity and sustainability, the pressure is on the A-brands
responsibility such as Sainsbury’s, Albert to get their act together.
Heijn, Edeka and Coop Italy.
•S
econdly, retailers that have global brands, so
if they do not act assertively on sustainability
issues there may be potential damage to their
brand on a global level, e.g. Tesco, Lidl and
Aldi.
| 2020 | RESEARCH REPORT | IPLC 5
Contents
Executive Summary 5
Introduction 7
UK 8
Ireland 12
Germany 16
France 20
Italy 24
Portugal 28
Spain 32
Netherlands 36
6 IPLC | RESEARCH REPORT | 2020 |
Introduction
Responsible consumer behaviour is central RESEARCH SETUP
to the social debate on climate change and In January 2020, IPLC’s partners surveyed the
sustainability. Notably the younger generations market in eight EU countries. Firstly, an analysis
are concerned about the impact of their was made of what more than 50 retailers
conduct on the planet and their own future. It communicate with regard to their sustainability
is therefore not surprising that food retailers strategies and objectives on their websites and
in particular are explicitly involved in the in annual reports. Secondly, a large number of
discussion with visible and measurable action. stores were visited to assess what has become
As providers of the daily necessities in life, they visible in terms of tangible results on the
see initiatives in this area as an opportunity to shelves. We specifically looked for initiatives
profile and differentiate themselves. taken with private label as retailers are aware
that in this area in particular, they are in a
Retailers are very close to the consumer and unique position to make a difference.
continuously seek to intensify their relation
with them to drive shopper loyalty. Within MANAGERIAL RELEVANCE
the private label strategy, sustainability in all We believe our research is relevant for both
its forms offers them a unique opportunity to retailers and suppliers. For retailers it is
respond to the ‘mindful living’ consumer. important to assess how their objectives and
actions compare with competitors in their
In most EU countries the top three food market and what they can learn from initiatives
retailers take well over 50% of their local taken in other countries. For suppliers -
market. Add to this the ever expanding growers and private label manufacturers alike
presence of global discount retailers such - it is crucial to understand what is on the
as Aldi and Lidl and it becomes clear why all sustainability agenda of their retail clients and
players are in the spotlights and as a result how they can respond to this to support them
at the forefront when it comes to taking in achieving their objectives. This will enable
their responsibility in the field of sustainable them to better prepare for retail client visits.
business. A proactive attitude as well as commitment
to support retailers driving the sustainability
Since the 1980s, when private label growth agenda may lead to a deeper engagement with
developed its own momentum, their retail clients.
the role of private label has changed. Whereas
in the beginning it was all about margin Furthermore, this survey has significant
improvement and changing the leadership value for the supply industry (packaging and
within the supply chain (retailer in the lead as ingredients) and other professionals active in
opposed to brand manufacturers), it switched the agro-sector and private label supply chain.
to differentiation and category management.
Nowadays, private label strategies are aimed In the following report, we share the findings of
at supporting the retailer store image and our annual IPLC research by means of a range
sustainability objectives offer a unique of country reports including photographs to
opportunity to do so. Topics such as the carbon illustrate a selection of interesting initiatives.
footprint, packaging and waste reduction, We expect it will provide unrivalled insight for
responsible fishing, animal welfare, social all participants in this market sector. Not only
responsibility and biodiversity can all be directly where it stands today but also in identifying
or indirectly addressed with private label. areas of growth and opportunity for the future.
At IPLC we wanted to better understand how
retailers across Europe have defined their
agenda to address all these objectives. What
measurable targets were set and what has
been achieved so far?
| 2020 | RESEARCH REPORT | IPLC 7
United Kingdom
GLOBAL INTRODUCTION
2019 saw the continued reshaping of the UK
Grocery market as the discount sector attracts
a greater share of consumer spending. In the
last decade the Big 4 (Tesco, Asda, Sainsbury’s
and Morrisons) have seen their share decline
from 75.6% to 67.7%. Aldi and Lidl have seen
their combined share over the same time frame
rise from 5.2% to 14.1%. Whilst their combined
growth is slowing, they still grew by 7.9% in
2019 vs an overall market growth of 0.9%.
We also have some other stand-out operators
such as the Co-op that has shown continued
growth through 2019, achieving 2.9% for the
year. Ocado, the pure play online retailer, has
also seen growth of 9%, albeit from a low share
of 1.4%.
Kantar are now stating that private label
accounts for 50% of value and nearly 56% of
volume sales. We are likely to see private label
take an ever-larger share of sales as Aldi and
Lidl continue to take sales from the Big 4.
Asda encouraging consumers to re-use bags
SUSTAINABILITY HOT TOPICS or bring their own
The two hot topics in the UK market have been
plastic reduction closely followed by food waste.
The debate around plastic reduction stems from
the Blue Planet TV programme featuring David
Attenborough aired in November 2018. The
clear evidence that showed extensive plastic Regulations; current estimates are that industry
pollution in the Oceans galvanised consumers pays about 11% of the costs to recover and
and businesses to find ways to reduce plastic recycle packaging. The plan is that industry will
used in the supply chain. It also initiated a pay more of the costs. The government has
renewed focus to make any material used announced that any plastic not having a 30%
recyclable. Black plastic which is widely used recycle content will attract a tax of £200 per
in fresh meat and ready meals has been a real tonne.
issue as colour sorting equipment in recycling
centres cannot identify the material. Food waste remains a massive issue in the
UK, with WRAP estimating that 10m tonnes
The UK also has a major issue in that there is are thrown away per annum. Over the last two
no national strategy around recycling standards to three years, retailers have been very active
but it is left to local authorities working with in working with charities to ensure that food
recycling companies. This leads to massive nearing their expiry dates is used to help those
differences across the country on what can most in need. New technology has played a
and cannot be recycled at present. However, major part in facilitating this, with Fareshare
government, in consultation with industry, has supported by Tesco in leading the advancement
now started to bring together a more coherent in this concept. Now supported by many other
strategy on recycling. This will include a total retailers and manufacturers in 2018 they
review of the current Producer Waste Packaging distributed over 46m meals.
8 IPLC | RESEARCH REPORT | 2020 |
United Kingdom
Waitrose reminding customers to use their own Marine Stewardship Council logo on Tesco
bags canned Mackerel
RETAILERS IN ACTION
Most UK retailers support the UN Sustainability
Goals within their sustainability reports and
policies. This is then turned into specific action
by supporting a range of global initiatives such
as the Cerrado Manifesto, where every UK
retailer is a signatory. As an example, Tesco
recently committed an additional £10m support
for this over the next five years. The Marine
Stewardship Council (MSC) which promotes the
concept of sustainable fishing also has strong
support across UK retailers. Tesco has taken a
lead in many areas such as being the first UK
retailer to publish its waste figures (2013) and
their top 27 suppliers have now also done the
same. Dave Lewis, CEO of Tesco, is chair of The
Champions of 12.3, whose target is to halve
Waitrose addressing the issue of non-recyclable coffee cups. food waste by 2030. Other UK retailers are now
also publishing their food waste data.
All UK retailers, apart from Iceland, support the
WRAP Plastic Pact which aims to have 100%
of plastic reusable, recyclable or compostable
by 2025. Morrisons was the first UK retailer to
announce in November 2019 that it had removed
black plastic from all of its private label. At the
same time, it was widely reported that most
other UK supermarkets were also close to
removing all black plastic from their ranges.
| 2020 | RESEARCH REPORT | IPLC 9
United Kingdom
Rainforest Alliance and Fair-trade Bananas at Aldi
Asda was the first to announce new packaging (bananas/pineapples), Fairtrade (coffee/
for all fresh steaks, which reduced plastic tea/bananas/chocolate), Red Tractor (meat,
and also allowed for better package imagery. milk, fresh fruit and vegetables), MSC (fish),
Through these changes, the use of black plastic RSPCA (eggs, fish) FSC (paper products). Every
has been reduced by 700 tonnes annually. Aldi retailer uses these on-pack claims, even the
have changed some lines to the same pack discounters. Red Tractor, a UK quality standard
format and claim an 88% reduction in plastic. for farms, is used by Aldi and Lidl across all
In terms of products, many retailers have meat products and many lines of fresh fruit and
on-pack claims e.g. Rainforest Alliance vegetables.
10 IPLC | RESEARCH REPORT | 2020 |United Kingdom
CHALLENGES FOR SUPPLIERS CONCLUSION
The main challenge for suppliers to the private The private label market has the ability to make
label market is to ensure that demands from significant changes to the whole sustainability
their customers are consistent. As an example, and environmental debate, what is more they
varying demands across types of packaging can achieve this at pace. A good example is
will add considerable costs. Moreover, changes the speed in which the market has been able
to the types and formats of packaging can to reduce black plastic. Questions are now
mean that significant investment is required being asked about the progress of this made by
for packaging machinery. With traditionally brands.
short-term supply agreements, how will this
cost be covered? The answer can only be longer However, the challenges we face cannot be
term supply agreements that are multiyear and solved in isolation. It is only by government,
recognise the investment required. There is NGOs, retailers and private label suppliers
evidence that this is happening with three- and working together that we can effect real
five-year contracts already in place on some and lasting change. I firmly believe that the
contracts. private label supply chain has the expertise
and detailed understanding of every step in
The control of the downstream supply chain the process to facilitate this change in a truly
also adds considerable demands on the need collaborative way.
for sophisticated control systems to ensure
that products meet the on-pack claims. With For more information
supply chains sometimes stretching thousands contact Richard Harrow:
of miles, this becomes a massive challenge. rharrow@iplc-europe.com
Tesco’s recent incident with private label
Christmas cards being packed by Chinese
prisoners is a very recent example of what can
go wrong.
| 2020 | RESEARCH REPORT | IPLC 11Ireland
GLOBAL INTRODUCTION
The Irish grocery market has seen major change
since 1999 when Aldi & Lidl arrived on a mission
to redefine discount supermarket retailing.
The nation has seen an economic boom, bust
and recovery and in this environment, the
discounters have grown almost five-fold from
around 5% of the market in 2004 to almost
24% by the end of 2019.
This has come at the expense of two retail
channels. Firstly, independent retailers have
struggled, very few family-owned grocers are
not aligned to a major symbol such as Spar
or Centra. Secondly, the mainstream multiple
supermarkets have declined from 77% to
65% of the market in the same period. In
the multiples, this decline has not been
reflected in store numbers, so overall retail Freezer sticker in Lidl makes the link between using less resources,
space has grown, but so has the proportion of helping fight the climate crisis and saving customers money
underperforming, high food waste stores. The
prognosis is that the discounters will continue
to grow and define the market dynamics. And
with private label products approaching 60% of
volume sales, we can expect to see even further SUSTAINABILITY TRACK RECORD
movement in favour of the retailer brands. Sustainability has been firmly established on
the global media radar since 2018. Consumers
have been bombarded with messages around
a narrow range of topics such as single use
plastics and oceanic pollution. This has been
driven by moments such as the airing of David
Attenborough’s Blue Planet in November 2018
and the speech of Greta Thunberg at the UN
Climate Action Summit in September 2019.
However, there are many more diverse
sustainability issues and many have been
on the agenda of Irish retailers for some
time now, without becoming part of their PR
programme and without becoming seared
into the public consciousness. Specifically, in
an environment of exceptional competitive
pressure, grocery retailers have been managing
costs by using fewer resources, fewer materials
and less energy: twin-deck, aerodynamic design
trailers have been in use for many years; most
retailers have already refitted with low-energy
LED lighting solutions; returnable crates are
common across the fresh categories, heavily
reducing the requirement for single journey
cardboard boxes.
12 IPLC | RESEARCH REPORT | 2020 |Ireland
Retailers have been working in scientific SUSTAINABILITY HOT TOPICS
detail on demand planning, balancing product Given retailers’ impetus to date, it has become
availability with reduced food waste and price clear just how hard it will be to quickly deliver
mark-down. Roundtable on Sustainable Palm an industry-wide step change. But again, given
Oil (RSPO) palm oil and Marine Stewardship that there are 17 UN SDGs, consumers are
Council (MSC) seafoods have been on the beginning to demand action on a wider number
agenda for more than five years now. And of fronts. As a result, retailers have only recently
public health in Ireland has been benefitting for started to realise the need for an integrated
over a decade from UK-driven improvements sustainability strategy, where not all of the
to both the nutritional profile and labelling of pillars are immediately commercially beneficial.
consumer packaged goods. All of these are That said, the single hottest topic currently in
worthy sustainability initiatives, coincidentally Ireland is single-use plastics. Tesco, Aldi and Lidl
aligned to the UN Sustainable Development have made significant commitments around
Goals (UN SDGs), but more inspired by an plastic packaging, reducing the quantity used
overall need for efficiency and regulatory and making it more recyclable. Black plastic
compliance. is being phased out due to its disruption of
colour sorting equipment in recycling centres.
However, customers are not always aware
of what types of plastic can be recycled so
separation is inconsistent. Furthermore,
indigenous supermarket companies will find it
much harder than their global counterparts to
establish a credible direction and then produce
measurable improvements. Dunnes Stores,
Ireland’s number one grocer, has only just
appointed a sustainability manager in mid-2019
and is yet to make any public commitments on
its sustainability agenda. On the other hand,
Musgraves has been addressing sustainability
issues over the last ten years, recently
introducing fully compostable coffee cups and
carrier bags.
Tesco are active in attempting to change consumer behaviours like
bringing your own bags.
| 2020 | RESEARCH REPORT | IPLC 13Ireland
RETAILERS IN ACTION its customers from 2-litre plastic tubs to 1.75-
Ireland’s international retailers, enjoying the litre Tetra Pak cartons. It was too soon for
benefit of their UK or EU-based resources and customers though and the switch-over has
thought leadership, support the UN SDGs and been gradually scaled back, with only one SKU
have published detailed reports. However, remaining on planograms in early 2020.
the key in-store communication topic remains
‘value’. Tesco has a highly robust sustainability CHALLENGES FOR SUPPLIERS
strategy, personally sponsored by group CEO The key challenge for Irish suppliers is to quickly
Dave Lewis, but the only obvious and consistent define their own sustainability agenda. They
message in its Irish stores is that “You Won’t need to be clear on which of the 17 SDGs are
Pay More” (i.e. versus the German discounters). most relevant to their specific industry or
Scratch the surface though and we do start category or else risk being subject to prevailing
to see movement at product level. Aldi, Lidl consumer/retailer demands. This takes skill
and Tesco are displaying their sustainable and resources and in a highly deflated market
sourcing credentials on-pack with Rainforest with wafer-thin margins in many private label
Alliance, Fairtrade, MSC seafood, UTZ cocoa suppliers, it is a real challenge to take a long-
and FSC paper logos visible on-shelf. In 2018, term, informed view.
Tesco’s Irish milk buyer attempted to switch
In 2018 Tesco Ireland’s milk buyer attempted an ambitious switch Aldi use widely recognised sustainability
from 2ltr plastic tubs to 1.75ltr Tetrapak cartons, reducing plastic by certifications on-pack
75%. There was no price disadvantage, and the message was
communicated well on-pack, but shoppers did not support the
move. It was too much of a change, too soon, and Tesco gradually
migrated back to plastic tubs on most SKUs.
14 IPLC | RESEARCH REPORT | 2020 |Ireland
CONCLUSION
In many respects, Ireland’s grocers are way
ahead of the curve in improving consumer
health and reducing the wasteful use of
resources. However, this has been mainly driven
by commercial and regulatory imperatives.
Consumers (aka voters) have taken note
of this, since widespread step change will
be achieved much more quickly if the law
requires this and new green laws are far more
likely to be implemented by green politicians.
Indeed, at the time of writing this report, the
Irish electorate has just recently voted in the
national parliamentary elections, quadrupling
the Green Party from three members of
parliament to 12. Equally, sustainability
professionals, struggling to get traction in an
organisation should focus on becoming more
commercial to get better results, rather than
hoping that their commercial decision-maker
bosses will become more sustainable.
For more information contact
Malachy O’Connor:
moconnor@iplc-europe.com
| 2020 | RESEARCH REPORT | IPLC 15Germany
GLOBAL INTRODUCTION Fridays. Young protesters leave school without
The German Retail Market is still led by the big permission hence the name Fridays for Future.
four: Edeka/Netto (23.0% share), Rewe/Penny The movement was inspired by the Swedish
(15.6%), Schwarz Group: Kaufland/Lidl (15.6%) activist Greta Thunberg, who went on a school
and Aldi Group: North and South (11.8%). With strike on Fridays for a better climate and
online operator Amazon, a new challenger has subsequently addressed national parliament in
entered the playing field. Amazon is actually Stockholm.
number five in Germany with a market share of
6.0% and has been achieving significant growth RETAILERS IN ACTION
over the past 12 months (+ 17.4%). Another Most German retailers have action plans and
characteristic in the German market is the policies in place to address their sustainability
presence of large drugstores. DM with a 3.2% objectives and respond to the expectations
market share and Rossmann (2.6%) are the of their shoppers. Private labels are used to
leading companies in the drugstore industry. underpin their sustainable image and improve
The market share of private label is 37.0% shopper loyalty. Consumer interests such
and it is used as an important tool to increase as vegetarian, organic, free-from and eco-
consumer loyalty. friendly cleaning have initiated new private
range introductions at Edeka, Aldi and Lidl.
SUSTAINABILITY HOT TOPICS The message in their communication is clear:
Global warming and climate change are of huge less packaging and less plastic. At times this
concern to the German public. Packaging and seems more important than price, as was
plastic reduction score high on the consumer’s illustrated in a recent Lidl campaign. Lidl’s
personal agenda besides climate change and Responsibly Packed leaflet in January 2020
the concern for animal welfare. details the percentage of plastic reduction in
the packaging of 170 private label products.
A broad discussion on the individual carbon
footprint is one of the trending topics in the
media. Based on this, alternative modes of
transport, reduction of plastic and packaging,
the ban of microplastics and the reduction of
meat consumption (animal welfare and climate
change) are high on the daily agenda. NGOs
and the government support these issues and
a new packaging regulation has been in place
since 2019.
Young people are driving an international
campaign for more sustainability and the
Fridays for Future movement is one example.
These manifestations show up in many
German cities where people demand a more
sustainable policy from those in power. They
fear for their future unless immediate action is
taken. These demands are expressed in public
demonstrations and protests that take place on
Communication on plastic reduction in
packaging at Lidl
16 IPLC | RESEARCH REPORT | 2020 |Germany
Increasingly, consumers are reducing their meat To address the concern over animal welfare, all
intake and replacing animal protein by plant- retailers have started classifying meat products
based alternatives. Retailers such as Edeka, into four different tiers: 1 for conventional
Lidl and Aldi have responded by offering private standard meat up to 4, the highest tier, for
label vegetarian and vegan products in more organic meat. Consumers are now able to make
sustainable packaging. Both Aldi and Lidl are a well-informed choice and may decide to pay
striving to become the number one German more to support better conditions for the way
retailer in the vegan segment. in which the animals are raised or choose to
buy the cheapest meat available. The result of
In their ‘Verpackungsmission’ campaign, Aldi is this classification is that more organic products
seeking to educate the consumer in effective can be found in the stores.
recycling. To facilitate recycling, bespoke
packaging was created to ease separation of Depending on the season, retailers aim to offer
the different components, examples of which regional products in their stores to support
are a perforated strip around a plastic yoghurt local communities and reduce their carbon
tub and white plastic bottles. footprint. Rewe offers a range of private label
Most retailers have promised to reduce the items under the Rewe Regional label.
packaging in their private label by 20-25% by
2025.
Perforated strip for shower gel at dm to facilitate recycling
| 2020 | RESEARCH REPORT | IPLC 17Germany
Aldi and Lidl use solar panels and have CHALLENGES FOR SUPPLIERS
switched to more efficient cooling cabinets Suppliers of private label must comply with the
in their stores to help move toward an energy ambitious requirements of German retailers.
neutral status. In order to advance the logistics Sustainability in all aspects is clearly high on
transformation, Lidl is to switch to trucks all their agendas. Those unable or unwilling
running on liquified natural gas (LNG). By the to adapt are highly unlikely to succeed in the
end of 2020, up to 100 LNG trucks will be used future. Challengers with innovative and fresh
to transport goods from Lidl logistics centres to ideas will get the opportunity to gain new
stores across Germany. [photo] business and replace incumbent suppliers.
Suppliers of personal care products are being
forced by grocery retailers and drugstores to
reformulate their products and stop using
microplastics. Rossmann and dm actively use
the ‘free-from-microplastic’ claims in their
marketing campaigns. [photo] Generally
speaking, claims such as ‘free-from’ and
‘vegan’ are gaining importance.
Lidl will use liquified gas-powered trucks for internal logistics Free from microplastics shampoo at Rossmann
18 IPLC | RESEARCH REPORT | 2020 |Germany
CONCLUSION
Sustainability is the key topic in society and
is therefore specifically addressed by private
label suppliers in the German market. Grocery
retailers and drugstores use own brands to
demonstrate their engagement for a better
world. The co-operation between retailers
and NGOs such as NABU (nature protection
federation), Viva con Agua and WWF are
gaining weight in endorsing the trustworthiness
of the retailer’s initiatives. Often retailer
requests to the suppliers are more ambitious
than legal requirements. Suppliers of private
label are expected to respond to the priorities
on the retailer’s agenda. Those who do will
benefit from the opportunities.
For more information contact
Koen de Jong:
kdejong@iplc-europe.com
| 2020 | RESEARCH REPORT | IPLC 19France
GLOBAL INTRODUCTION unintended consequence is that the law has
French food retail market volumes have effectively increased the price gap between
declined for the last four years in a row. With the big national brands and private label
a 1.4% decline in 2019 (vs -0.7% in 2018, Iri options. Private label market share has now
Reperes 2020), reduced consumption is the reached 32.7%, benefitting from this renewed
prevailing trend. Nevertheless, the food retail price advantage and a rapid growth in the
market managed to achieve positive growth in sustainable product offer. Organic products
2019 (+0.8%) based on a combination of price are still the engine of growth (+22%) and even
inflation and French consumers’ increased if private label is growing slower (+18.3%,
preference for value-added products. Nielsen) they have initiated the sustainability
conversation long before national brands who
By channel, the discounters are winning are now investing significantly.
(+6.2% turnover), followed by independent
chains (Système U, Leclerc and Intermarché
+1.7%). Lidl has developed a reputation for
being a high-quality and affordable retailer
through continuous investment in media (TV,
newspapers) and a private label focused offer.
The cooperative retailers are growing thanks
to a combination of competitive price position
and greater credibility in their local provenance
credentials and localised approach to doing
business.
France has been the exception regarding
private label development in Europe. However,
after almost five years of declining private
label share, 2019 saw some growth with an
increase of 1.7% in value (Nielsen). French
legislation (EGALIM), which limits ‘Buy One
Get One Free’ promotions, has introduced
new legal requirements around deep discount
selling. Where previously there was a ban
on below-cost selling, there is now a further
requirement that the biggest brands are sold
at retail prices that create at least 10% gross
margin. The intention was that this additional
profit could be routed towards local farmers to
offer them a fairer price for their produce. The Leclerc private label positioning with the “C’est
qui le patron” which brings fair compensation
for farmers.
20 IPLC | RESEARCH REPORT | 2020 |France
SUSTAINABILITY HOT TOPICS The French government has initiated actions
French consumers are increasingly concerned to tackle these issues and the EGALIM law is
about climate change and this has put pressure part of this answer. The 10% increase of resale
on the French food supply chain. The Paris below cost threshold is meant to benefit the
Agreement in 2015, followed by the Green producer by increasing their revenues. At the
Party’s recent victories in the 2019 European other end of the supply chain, packaging
elections demonstrates that French consumers waste and food waste are also being targeted
are actively changing their consumption habits, by the government through the National
supporting local producers and farmers as an Pact on Plastic Packaging” (signed by brands
expression of responsible food consumption. manufacturers and retailers in 2019) and the
The Max Havelaar/Opinion Way survey of 2019 Food Waste Law of 2016. A minimum of 60% of
confirms that sharing value is a key issue plastic packaging should be recycled effectively
for the French. Preserving the environment, by 2022 and all packaging must be reusable,
in particular through the fight against over- recyclable or compostable by 2025. France
packaging and food waste, is an important wastes 10 million tonnes of food annually so the
element in the drive for conscious consumption, target is to reduce this by 50% by 2025 (base
especially among young French people. 2013). Since 2016, food stores of more than 400
m2 are obliged to donate unsold, edible food to
redistribution associations. Historically, some
supermarkets would use cleaning chemicals to
spoil unsold food waste, preventing the most
desperate people from getting food from bins.
Supermarkets are now banned from exercising
these unsavoury practices which render food
waste inedible. The media, aided by repeated
scandals, have increased consumer awareness
of this issue in recent years.
These major sustainability issues have also
generated new opportunities in the market
with the development of food apps (Too Good
To Go, Yuka, YaQuoiDedans) helping customers
to make informed decisions. New brands such
as C’est qui le patron (Who’s the Boss) are
citizen-led initiatives and the development
of bulk product initiatives are supporting
packaging reduction goals.
In-store banners promote new agricultural
practices supported by the government
| 2020 | RESEARCH REPORT | IPLC 21France
RETAILERS IN ACTION
Most French retailers have embraced the
sustainability agenda, sometimes even before
legislation required it. As the last and most
visible part of the supply chain, retailers have
embarked on a programme of sustainability
commitments, mainly through their own
brands. Carrefour’s ‘act for food’ gathers 13
initiatives impacting 1,200 Carrefour products
and will continue in 2020 with an extra 900.
Leclerc is committed to its Marque Repère with
15 commitments focusing on transparency
on the origin of raw materials and plastic
reduction. In 2012, Système U was a first-mover
by initiating a crackdown on controversial
food additives and has managed to remove
more than 80 substances from its private label
range. Système U went through the Marke.
org consultation platform to collect ideas from
French consumers. Surprisingly, 30,000 Système
U employees contributed their ideas (out of the
70,000 polled by the group). In the end, 7,000
proposals were submitted. The two priority
subjects put forward by French consumers were Plastic reduction in bottled water at
"short food supply chain and monitoring the Intermarché has a significant impact
products seasonality" and "plastic packaging
and their recycling". Système U is already very
involved in the development of local links in
France for its 6,000 products and intends to be
a zero-waste brand.
Food waste, now banned for supermarkets and
restaurants, has gained attention thanks to the
Too Good To Go app which connects retailers
directly to consumers. Apart from Lidl and Aldi,
most retailers and specialists have engaged a
partnership with the app.
Almost all French retailers have started short
supply chain themed initiatives aimed at
private label or serve-over-counter products.
Auchan has so far established 120 ‘responsible
sourcing channels’ in a variety of categories
where they can demonstrate total supply chain A few of the private label wines at Intermarché private label
transparency and sustainability and ethical 'Expert Club' use the HVE logo (High Environnemental Value)
trading standards. Système U has developed
the brand U de nos régions (U from our regions)
to promote local business at the regional Despite the growth of organic products,
level and Leclerc is also following the same the certification label neither covers all
principle with its Alliance locales with 12,000 environmental issues nor satisfies the volumes
partnerships with small producers close to required in the market. Retailers are now also
stores. Thanks to its own production facilities, investing in new certifications in meat, fruit and
Intermarché is promoting its partnership with vegetables with the Bleu Blanc Coeur brand
local suppliers (more than 17,000 farmers). (higher nutritional value), High Environmental
Value certificate (improved environmental
impact) and Zero-residue (free from pesticides).
22 IPLC | RESEARCH REPORT | 2020 |France
THE IMPACT FOR SUPPLIERS the longer term, we believe that sustainability
Retailers are increasingly demanding with features will be captured in production
regard to transparency and supply chain standards such as the British Retail Consortium
integrity on finished products, packaging, Standard (BRC) or International Food Standard
additives and raw material origin. Suppliers (IFS).
need to balance these demands whilst Even if the French market is a mature private
maintaining competitive pricing. Packaging label market, the growth of discounters will
will be a major challenge since the playing most probably impact the share of retailers’
field is highly dynamic. And, whilst packaging brands, especially with the transformation
suppliers are actively innovating to offer more of Leader Price stores into Aldi. International
sustainable options, these solutions may not brands may find it more difficult to fulfil the
as yet be competitively priced. Furthermore, requirements of these new standards (local
even if solutions exist, e.g. switching from production, transparency, packaging reduction)
plastic to cardboard cartons, the required where the flexibility of SMEs will be a serious
production line investments are likely only asset for private label. However, this transition
feasible for big companies or will require more is impacting the entire supply chain and will
long-term collaboration between retailers and take some years to be fully implemented. Long-
manufacturers. term trading relationships will not only be a
differentiation tool for retailers but also a way
CONCLUSION to effectively transform the food industry. Will
Consumer demands are rapidly evolving and we see more vertical integration in the private
as the first point of contact, food retailers are label sector in the coming years?
going through a major transition too. This will
create opportunities for the suppliers with the For more information contact
agility and capacity to help retailers deliver on Remy Medina:
their sustainability commitments. However, in rmedina@iplc-europe.com
| 2020 | RESEARCH REPORT | IPLC 23Italy
GLOBAL INTRODUCTION
Overall, food and drink consumption was
largely stable in Italy in 2019, albeit with
regional variances, growing +2.52% in the south
and declining by -1.0% in the north (Nielsen
Osservaitalia, December 2019). The large retail
chains saw consumer packaged goods sales
grow by +2.1% (IRI, 2020), despite the constant
growth of out-of-home food consumption which
exceeded 37% of total Italian food purchases.
Italy is number one in Europe for per capita
annual food expenditure at €2,428, followed Sustainably fished Yellowfin tuna at Esselunga
by France at €2,353 and Germany at €2,019
(source: OECD-Rapp, Coop 2018), confirming
the absolute centrality of ‘food and social
experience’ for Italians. In Italy, the dynamism and success of stores
owned and operated by local entrepreneurs
In September 2019, Coop and Conad effectively (Conad, VèGè, Selex) is assured since they
became joint market leaders with a 13.4% and are closest to the needs of local customers
13.3% market share, respectively. VèGè Group and cultures of the ‘bel paese’, the ‘beautiful
realised the strongest growth and became the country’.
fifth biggest retailer at 7.0% by winning the
business of several regional retail chains (GNLC, SUSTAINABILITY HOT TOPICS
September 2019). Even Conad, following the Sustainability has firmly entered the
acquisition of Auchan Italia, is now being forced consciousness of Italians thanks to climatic
to rework its hypermarket format that is felt impacts, pressure from international media
to be in crisis. However, in a mature market, it and NGOs and the new taxes on plastic in
is important for market leaders to show real packaging and sugar in drinks. Food waste
leadership in terms of both performance and reduction strategies combine effectively with
innovation. Esselunga, with only 160 stores consumer needs since they come with the
on the peninsula, enjoys 8.9% market share, advantage of monetary savings for families.
thanks to a market-leading capacity to attract This phenomenon is facilitated by the birth
customer footfall and loyalty. Retailer own of organisations such as Last Minute Market
brands or private labels represent €27bn of or the local Caritas, which collaborate with
annual sales in a total large chain retail market retailers to collect surplus food at near end-
estimated at €100bn (GNLC, 2019). This is date, making it available to people living in
constantly growing, with private label shares poverty. Apps such as Too Good to Go also offer
similar to France and Germany, especially in the very low-priced products nearing expiration to
north of Italy. The own brand share of sales is consumers who go in-store to collect.
over 40% at Unes, over 30% at Coop and Conad
and likely over 30% at Esselunga, if we include Another consumer awareness, revealed by
their exclusive brands. Own brands are also research carried out in the Bologna University
growing in line with discount channel growth Business School, is the relationship between
which is ahead of market growth. The discount CO2 equivalent emissions and the product
market leader is Eurospin, followed by Lidl, MD choices of shoppers at the supermarket
and Aldi, which entered Italy in 2018. All four shelves. In order to help manufacturers
chains are aggressively opening new stores and and retail companies, the Observatory On
will likely reach a combined 24,6% market share Sustainability of Packaged Consumer Goods,
in the next three years (IPLC estimate based on founded in 2019, helps to measure the impact in
different sources). CO2eq of the ranges that supermarkets select,
E-commerce and grocery home deliveries have starting from the Life Cycle Assessment of the
exploded in 2019 with growth of + 37% (IRI). ingredients and packaging.
24 IPLC | RESEARCH REPORT | 2020 |Italy
In the context of social responsibility, the RETAILERS IN ACTION
Italian government has put in place legislation The main retailers in Italy have made
to prevent exploitation of immigrant workers commitments and launched communications
and poor people in agriculture in southern around sustainability through their own
Italy. Unethical practices were highlighted strategies but also under external pressure from
via numerous consumer-facing campaigns. world events and customer demands. Retailers
Altromercato, one of the largest fair trade have also been urged by
organisations in Europe, launched Solidale The Italian Alliance for Sustainable
Italiano (products made in Italy with fair Development (ASviS) that promotes the
trade practices) which include Fair Tomato adoption of practices aimed at achieving the
products, certifying that collection, production 17 United Nations Sustainable Development
and distribution is done legally without Goals. However, the commitments and product
labour exploitation. Some northern European offer of retailers still seem inadequate when
companies actually threatened a boycott of viewed against the scale and urgency of the
Italian tomato imports, which proved a useful climate crisis and prevailing sustainability
impetus to legislate against the gangmaster agenda. Nielsen notes that 74% of consumers
labour system. Finally, the Coop launched its believe that companies are committed to the
Buoni e Giusti campaign that focuses on buying environment but only 16.4% of these offer
and selling only legally produced fruit and ‘green’ products, despite the fact that more
vegetables. than 70% of Italian consumers are willing to pay
more for these (Nielsen Sustainable Shopper
Report, AT2019). There is an increasing gap
between the growth of consumer awareness
and consumer action versus the access to
information and sustainable products in stores.
It is a dangerous gap, especially for private
label manufacturers and retailers who still do
not have clear, accountable, commitments and
objectives that are regularly and effectively
communicated to their customers.
Coop is one of the most active retailers in
Italy with a record, both in terms of projects
and communication, even though they may
appear slightly ambiguous. For example, on
plastic reduction, they repeat their intention
"not to demonise" plastic use, whilst taking on
reduction commitments. At the end of 2019, the
Coop campaign touched an emotional chord:
"with good shopping choices you can change
Fully traceable free-range eggs at COOP. Chickens raised without the world." Coop is also actively engaged in
antibiotics and GMO-free feed reducing the use of pesticides, glyphosate in
agriculture in particular, which means that
they now stock the largest range of organic
products available in Italy under a unique
brand: Vivi Verde Coop. Coop and Carrefour in
Italy are leading the work on traceability and
transparency in eggs, chicken and citrus fruit
supply chains.
| 2020 | RESEARCH REPORT | IPLC 25Italy
Conad has made important promises such as need to innovate with new packaging solutions,
the elimination of plastic by 2021 from many ingredients, traceability, etc. This is not a new
own brand packages and reporting in volume, problem since it has always been difficult to
but not in percentage, the reduction of plastic share the distribution of innovation costs in
and CO2eq. Esselunga has started a plastic a supply chain if the shared choices are not
bottle collection trial in its stores. In line with believed to generate new value. It is therefore
international strategies, the communication essential that the path towards sustainability
made by Aldi and Lidl is comprehensive and is carried out with a common entrepreneurial
clear. vision between private label producers
and retailers, guided by the leadership of
CHALLENGES FOR SUPPLIERS innovative retailers and retailer associations in
The impact repeatedly highlighted by collaboration with a task force of specialised
manufacturers is the conflict between the consultants, managers, universities and NGOs.
demand for lower prices by retailers and the
CONAD eco-friendly private label detergent
containing biodegradable plant-based
surfactants Positive impact on the environment by offering organic fresh milk at
Esselunga in Tetra Pak instead of a plastic bottle is communicated
on-pack.
26 IPLC | RESEARCH REPORT | 2020 |Italy
CONCLUSION The Italian grocery retail market is highly
The path towards sustainability within the end- saturated and is under intense competitive
to-end consumer goods industry, is played out pressure from out-of-home eating and
in Italy via three key practices: e-commerce, driving reduced supermarket sales
1. Collaboration, co-entrepreneurship per m2. In an attempt to address this, players
and team play. like Esselunga are experimenting with the
2. Creation of fairly shared value. integration of food retail and food service.
3. Innovation and competitiveness. The future success of Italian grocers will depend
on this kind of channel creativity as well as
Italian companies are known for their flexibility digitisation, omnichannel offers, customer
and entrepreneurial spirit but they lack the centricity and a credible sustainability strategy.
unifying and motivating effect of leadership This poses a challenge for private label since its
and collaboration that are essential in an traditional position as a value offer will need to
SME economy structure. Self-awareness is evolve to capture additional features or values:
an excellent starting point and the growth ‘valore e valori’.
of private label, which still lags behind other
countries, is an opportunity. For more information contact:
Paolo Palomba
ppalomba@iplc-europe.com
or Stefano Ghetti
sghetti@iplc-europe.com
| 2020 | RESEARCH REPORT | IPLC 27Portugal
GLOBAL INTRODUCTION
2019 was a good year for the Portuguese retail
market. Volume growth at +2.0% combined
with +2.2% price inflation resulted in total
growth of +4.2%. Private label grew quicker
at +7.2% versus brands at +3.0%. The current
private label share is around 36% in value,
however retailer brands constitute almost 50%
of the volume bought in the grocery market
(Nielsen).
An important event was the entrance of
Mercadona (market-leader in Spain) into
Portugal. To date, Mercadona has opened
ten stores, all in the north but national
coverage is its ultimate objective. The other
Spanish player, Dia, saw its market share drop
considerably because of financial problems.
Aldi has announced ambitious plans, aiming
to add around 130 new stores to its existing
estate of 70 stores by 2023. The market leader,
Sonae MC/Continente will continue to defend
its position determinedly, followed by Jerónimo
Martins/Pingo Doce. The two companies Pingo Doce offers the opportunity to refill
together hold a share of more than 55% of bottles with water in store
the total market. Below the top tier, we find
Intermarché (10%), Lidl (8.5%) and Auchan
(7.5%).
SUSTAINABILITY HOT TOPICS and €0.05 for bottles between 500 ml and 2.0
Sustainability has become increasingly litres. Nationwide roll-out is anticipated after an
important in the Portuguese market during initial trial period.
the last few years. The main topics are plastic
reduction, organic production, promotion In recent years, organic products have moved
of recycling and reducing food waste. Other from niche to a more mainstream position. All
topics with less focus include energy reduction, players have their private label organic range
transport optimisation and CO2 reduction. and are commonly merchandising all organic
Although not directly related to sustainability, products together in a defined location instore.
healthier living initiatives are also being It is normal for retailers to have recycle points.
promoted. Local production is also a feature but Not only for paper and plastic but also for
it is used mostly to create added value and not clothes, electronics, batteries, used oil, plastic
in the context of sustainability. caps, coffee caps, etc. Often the weight of
collected products is linked to an amount of
Regarding plastic reduction, free plastic bags at money to be offered to social institutions.
the point of sale have been banned. Similarly,
the use of styrofoam and ultra-light plastic bags Food waste reduction has a long tradition in
for fruit and vegetables will also be phased Portugal with the Banco Alimentar Contra A
out during early 2020. Another government Fome (Food Banks Against Hunger) active
initiative is the creation of a collection system since 1991. Banco Alimentar acts as a platform
for plastic bottles at supermarkets and between retailers and thousands of social
hypermarkets. Although not yet fully defined, organisations, together reducing waste on near
the system will likely be incentivised by giving end-date foods. Discounts on near end-date
discount vouchers to the consumers to be products are common and some retailers even
spent in-store. The value will vary between have specific locations within the store to
€0.02 for bottles between 100ml and 500ml, promote those products.
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